Chapter 5. Building the Solar/Hydrogen Economy: Getting to the Hydrogen Economy

The transition from fossil fuels to a solar/hydrogen energy economy can be seen in the widely differing growth rates among the various sources of energy. (See Table 5-2.) During the 1990s, wind power grew by a phenomenal 25 percent annually, expanding from 1,930 megawatts in 1990 to 18,449 megawatts in 2000. Sales of solar cells, meanwhile, grew at 20 percent a year, while geothermal energy grew by 4 percent annually. Hydropower, the fourth renewable energy source, grew at 2 percent a year.

Among the fossil fuels, natural gas grew the fastest, at 2 percent annually, followed by oil at 1 percent. Coal use declined by 1 percent a year, with the actual decline coming after 1996. Nuclear power continued to grow, but just barely, averaging less than 1 percent a year during the decade.

The contrasting growth rates among the various energy sources were even greater in the year 2000 than during the 1990s. World wind generating capacity grew by 32 percent and sales of solar cells by 43 percent. The burning of coal, the fossil fuel that launched the industrial era, declined by 4 percent in 2000; natural gas increased by 2 percent; and oil increased by 1 percent. Nuclear power expanded by less than 1 percent. These data for the latest year—with the dramatic gains in wind and solar combined with the sharp decline for coal—indicate that the restructuring of the energy economy is gaining momentum.58

Coal is the first fossil fuel to peak and begin to decline. After reaching a historic high in 1996, production dropped 7 percent by 2000 and is expected to continue declining as the shift to natural gas and renewables gains momentum. Coal consumption is declining sharply in both the United Kingdom, the country where the Industrial Revolution began, and in China, the world's largest user.59

The shift in the fortunes of nuclear power could hardly be more dramatic. In the 1980s, world nuclear generating capacity expanded by 140 percent; during the 1990s, it expanded by 6 percent. Confronted with decommissioning costs of power plants that could rival the original construction costs, the energy source that was to be "too cheap to meter" is now too costly to use. Wherever electricity markets are opened to competition, nuclear power is in trouble. With a number of older plants scheduled to close, its worldwide use is likely to peak and start declining in a matter of years.60

Nuclear power plant closings are now under way or slated in the years immediately ahead in many countries, including Bulgaria, Germany, Kazakhstan, the Netherlands, Russia, the Slovak Republic, Sweden, and the United States. In three countries once solidly committed to this energy source—-France, China, and Japan—nuclear power is losing its appeal. France has extended its moratorium on new plants. China has said it will not approve any additional plants for the next three years. Japan's once ambitious program is in trouble. A serious accident in September 1999 at a nuclear fuel fabrication plant north of Tokyo has reinforced rising public concerns about nuclear safety in Japan.61

Meanwhile, the use of wind and solar cells is growing by leaps and bounds. The spectacular growth in wind-generated electricity is driven by its falling cost. With the new advanced-design wind turbines, electricity is being generated at less than 4¢ per kilowatt-hour in prime wind sites—down from 18¢ a decade ago. Surpluses of wind-generated electricity on long-term contracts can guarantee the price, something those relying on oil or natural gas cannot do. With annual additions of wind capacity during the late 1990s exceeding those of nuclear power, the torch is passing to a new generation of energy technologies.62

In contrast to the old energy economy, in which a handful of countries control the supply, the new energy sources are widely dispersed. The economic opportunity for developing countries to develop their indigenous energy sources promises a strong boost to their overall development. New coalitions are evolving in support of the new energy sources, such as the one between U.S. environmental and agricultural groups in support of wind power development.

Satisfying the local demand for electricity from wind is not the end of the story. As noted earlier, cheap electricity produced from wind can be used to electrolyze water, producing hydrogen. At night, when electricity demand falls, electricity from wind farms can be used to power hydrogen generators to produce fuel for automobiles, trucks, and tractors.

With the first automobiles powered by fuel cell engines expected on the market in 2003 and with hydrogen as the fuel of choice for these new engines, a huge new market is opening up. As noted earlier, Royal Dutch Shell is already opening hydrogen stations in Europe. William Ford, the youthful chairman of the Ford Motor Company board, has said he expects to preside over the demise of the internal combustion engine.63

The economic benefits of developing local low-cost renewable sources of energy are obvious. In a community, for example, that gets its electricity from wind power, the money spent for electricity stays largely in the region. Developing wind resources thus promises to help rural communities in many countries, providing a welcome supplemental source of income and employment.

As the world energy economy is restructured, so, too, will the rest of the economy change. The geography of economic activity will be altered, in some cases dramatically. The traditional siting of heavy industry, such as steel production, in areas where coal and iron ore are found in close proximity will no longer be necessary. In the future, energy-intensive industries will be located in wind-rich regions rather than coal-rich regions. Countries that were once importers of energy may become self-sufficient, even exporting electricity or hydrogen.

One of the characteristics of the new energy economy is that it will rely much more on decentralized small-scale power sources rather than a few large, centralized systems. Small-scale energy systems designed to satisfy the needs of individual homes, factories, or office buildings will become much more common. Instead of a few highly concentrated energy sources, the world will be turning to vast numbers of small individual sources of energy. Fuel cells powered with hydrogen and the highly efficient combined-cycle gas turbines that are powered by either natural gas or hydrogen will become common. Fuel cells can be used to generate electricity for office buildings, factories, or individual homes or to power automobiles.

In the eco-economy, hydrogen will be the dominant fuel, replacing oil, much like oil replaced coal and coal replaced wood. Since hydrogen can be stored and used as needed, it provides perfect support for an energy economy with wind and solar power as the main pillars. If this pollution-free, carbon-free energy source can be developed sooner rather than later, many of our present energy-related problems can be solved. Electricity and hydrogen can together provide energy in all the forms needed to operate a modern economy, whether powering computers, fueling cars, or manufacturing steel.

On first reflection, such an energy system may seem a farfetched idea. But two decades ago, the idea of desktop or laptop computers and Internet communication seemed equally farfetched. As Seth Dunn of Worldwatch Institute notes, what is most inconceivable is that an information-age economy should be powered by a primitive, industrial-age energy system. As corporate and government decisionmakers begin to understand the need to restructure the energy economy, and just how economical and practical a zero-emissions, carbon-free energy system can be, then they may finally summon the sort of effort that supported the last great energy transition—the one from wood to fossil fuels a century ago.64

If the goal is to expand wind electric generation fast enough to accelerate the phaseout of coal, it would mean extraordinarily rapid growth in wind energy. Is such growth possible? Yes. The growth in the Internet provides a model. Between 1985 and 1995, the number of host computers on the Internet more than doubled each year. In 1985, there were 2,300 host computers on the Internet. By 1995, there were 14,352,000.65

A back-of-the-envelope calculation indicates what kind of growth would be needed for wind to become the foundation of the global energy economy, and how much it would cost. What would happen if wind electric generation doubled each year for the next 10 years, as adoption of the Internet did? Assume for the sake of calculation that in 2000 the world had 20,000 megawatts of wind-generating electricity online and that in 2001 this doubled to 40,000 megawatts, then in 2002 to 80,000 megawatts, and so forth. At this rate, by 2005, it would be 640,000 megawatts—nearly enough to meet all U.S. electricity demand. By 2010, it would reach 20.4 million megawatts of wind generating capacity, far beyond today's 3.2 million megawatts of world generating capacity or the projection of 4 million or so megawatts of capacity needed by 2010. This would not only satisfy world electricity needs, it could meet other energy needs as well—including those for transportation and heavy industry as well as residential uses.66

How much would this cost? Assuming generously that it would take $1 million of investment per megawatt of electricity, 10 million megawatts of wind power capacity would require an investment over the next 10 years of $10 trillion. This would amount to roughly $1 trillion a year—about double what the world spent for oil in 2000, or just 2.5 percent of the gross world product of $40 trillion. Another financial reference point, which is in some ways more relevant, is the $700 billion that the world's governments have been spending each year on environmentally destructive activities, such as coal mining, excess fishing capacity, and overpumping of aquifers. (See Chapter 11.) Shifting these subsidies into investment in wind development would accelerate the evolution of an eco-economy on several fronts simultaneously. This calculation simply illustrates that if the world wants to move quickly to eliminate excessive carbon emissions, it can do so.67

The transition from a fossil-fuel- or carbon-based economy to a high-efficiency, hydrogen-based economy will provide enormous investment and employment opportunities across the globe. The question is not whether there will be an energy revolution. It is already under way. The only questions are how rapidly it will unfold, whether it will move fast enough to prevent climate change from getting out of hand, and who will benefit most from the transition.

Realistically, how fast could wind generation expand during this decade? During the 1990s it expanded at 25 percent a year, with only a half-dozen countries accounting for most of the growth. If all countries with commercially viable wind sites began developing their wind, how fast could it expand? Could it double each year? That would be tough, requiring a mobilization akin to that during World War II. There might be a few annual doublings early in the decade while the base is still small, but then the rate of expansion would slow. How fast the world develops wind resources will depend in part on how fast climate changes and how alarmed we become by record heat waves, rapid ice melting, and more destructive storms. Although predicting the rate of future growth is not possible, it is clearly safe to assume that the world could be getting much of its electricity from wind by 2010 if it becomes important to do so.68

In his Worldwatch Paper Hydrogen Futures, Seth Dunn quotes President John F. Kennedy: "There are risks and costs to a program of action. But they are far less than the long-range risks and costs of comfortable inaction." Dunn then goes on to establish the parallel between Kennedy's cold war observation and the current energy transition. "There are risks and costs involved in rapidly building a hydrogen economy, but they are far less than the long-range risks and costs of remaining comfortably committed to the hydrocarbon economy."69

The key to accelerating the transition to a hydrogen economy is to get the market to incorporate ecological costs in the prices. The Economist argues that there is a need to level the playing field and then let the market take it from there: "That means, for example, dismantling the many subsidies that prop up coal and other fossil fuels. It also means introducing a carbon tax or similar mechanism to ensure that prices for fossil fuels reflect the harm they do to human health and to the environment." More and more analysts are reaching this same conclusion. A recent study by the Organisation for Economic Co-operation and Development also argues for restructuring taxes in order to reduce carbon emissions. Phasing in a carbon tax so that the burning of fossil fuels would reflect their full cost to society would accelerate the transition to wind energy, solar cells, and geothermal energy, expanding them far faster during this decade than during the last.70

59. Decline in coal use based on BP, BP Statistical Review of World Energy (London: Group Media & Publications, June 2001), p. 33. According to EIA, coal subsidies have been halved in China since 1984; EIA, "China: Environmental Issues" (Washington, DC: DOE, April 2001), p. 4.